vacation

Vacation Loans

Holiday loans bridge the gap between your seasonal travel, gift, and party commitments, and your bank account balance. As an alternative to running high balances on your credit cards, these personal loans can help alleviate the pressure of ensuring you and your loved ones make the most of the holiday season. Though holiday loans are not cash advances or payday loans, they are normally short-term with high interest rates and fees. Lending amounts range from $1,000 to $35,000 or more.

Vacation Pie

While holiday loans can have all sorts of uses, one of the biggest expenses that you may need to pay for is the cost of travel (i.e. flight tickets, rail, or however else you choose to get to your holiday destination). Whether you’re traveling domestically or abroad, being able to responsibly fund your adventure is key to having a stress-free time – both during the trip and after coming back. More often than not though, travelers grossly underestimate certain aspects of their intended vacation. Considerations such as foreign exchange rates, local inflation, and country-specific cost of living changes are often missed entirely. It is important to fully research and understand your destination, and develop a realistic daily budget that will ensure you are able to eat well, relax, recover, and have a great time with friends and family while maintaining fiscal responsibility. The last thing you want is to arrive at your destination and run out of money. This can have all sorts of consequences, including limiting your ability to immediately travel home in case of an emergency. Planning ahead for every contingency well in advance of your trip is essential.

Where do you start when planning your vacation? As with most things in personal finance, it is best to first draw up a simple budget. Determine your dates of travel, air ticket prices for those dates (and, dates within a reasonable range of your desired dates), hotel, hostel, or Airbnb prices, and what you think you will need to enjoy all facets of your destination of choice based on your research. The best way to do this is to put your expenses in rows, and the different date ranges in columns, creating a table. This way you can produce a simple financial model that compares your various options on a side-by-side basis. You can even build the columns to include different destinations so you can fully see how much an alternate destination might save you. This is the most basic level of financial analysis when planning a trip. There are also iOS and Android applications that specialize in travel budgeting and management. They include:

Phone app

    • Trail Wallet
    • Spent
    • Tripcoin
    • Trabee Pocket
    • Splitwise

The great part about using an application is that you can track your real-time spending against your budget while you’re traveling, and make adjustments accordingly. In addition, technology is a little less painless than physical budgeting on pen and paper, and you can make the budgeting process a part of your overall holiday experience. This is one way you can demonstrate fiscal prudence and financial maturity to yourself and your family.

So where does a holiday loan play into this? It’s easy to just use your credit cards and get on with your trip. And that might be the right end result for you. But do the research on your current cards. Do you have the available balance to fund your trip from start to finish? What is your Annual Percentage Rate (APR)? Do you receive cash back for every dollar you spend? Do you receive travel rewards or air miles for every dollar you spend? What are the withdrawal fees for your card both domestically and overseas? Is there an exchange rate fee associated with your card? What are the impacts of your trip once you’re home and have a high credit card bill? The list can go on and on, especially if you’re traveling abroad, and you can run up significant debt if you’re not careful.

A holiday loan is an unsecured personal or signature loan that you take out for the specific purpose of funding your holiday expenses. Although thus far, we have focused exclusively on vacations and travel as the purpose for this loan, a holiday loan can bridge your cash needs for all types of holiday expenses including gifts and hosting events for your friends and family. In most cases, personal loans are going to have a lower APR, fee structure, and more favourable repayment terms than any available credit card. Although banks, credit unions, and online lenders generally won’t specifically market a travel or holiday loan to potential borrowers, unsecured loans can be tailored for this use. Also, if you’re taking out a loan for your holiday needs, you now have a budget by default. The loan generally isn’t a revolving line of credit (which allows you to spend repaid amounts again), so what you receive in the form of a loan is all you can spend.

P2P

Even if you have less-than-perfect or bad credit, there are unsecured loan options for you. Online and alternative lenders such as Peer to Peer (P2P) platforms have less strict application and approval criteria, and your loan can be privately funded in as little as 24 hours. Most loan applications are the same. You will need to provide your full name, date of birth, verified residential address, Social Insurance Number (SIN), information regarding your employment and income, and possibly details about your mortgage or monthly rental rate. It is important that you’re always honest about your financial situation since all of the data can be easily verified through pay stubs, tax returns, mortgage documents, and rental agreements. In nearly every case, you will be required to provide verification items for all of these items.

It is not recommended that you take a payday loan for the purpose of bridging your holiday or travel needs. Payday loans carry very high interest rates, they are short-term, and they have unforgiving repayment and nonpayment terms. In most cases, the entire loan will need to be repaid by your next paycheck. It is very easy to go from living paycheck to paycheck to living advance to advance. Don’t put yourself or your family in this situation. Be smart and live within your means, even if this means sacrificing some of the wants and luxuries in the short term that you may have grown accustomed to.

Also, be smart during holidays such as Christmas, Hanukah, Ramadan, and Eid. It is very easy to get caught up in the festive spirit and spend beyond your means. We all want to be the “gift giving hero” of the season. But, assess what you, your loved ones, and your group of friends really need and spend accordingly. Holiday marketing – including Black Friday and Cyber Monday – is meant to make you spend money that you don’t have on things you don’t really need. In most cases, the “savings” presented are just a direct reflection of how overinflated material goods pricing is throughout the remainder of the year. To be certain, merchants aren’t taking a loss for you to get a good holiday deal during their “sales.” They are just lowering their own margins in the short term in the hopes of you buying other items throughout their stores (which you probably will). The increased volume they receive is more than enough to offset the margin cut they take. Though it might seem you’re getting a great deal on that $799 55” UHDTV, the fact is that you’re still paying well above manufacturer cost for the unit. On top of that, you will probably end up purchasing a wall mount, gold-plated cabling, and other “accessories” for your new television at a slightly discounted if not full price. While the store made less money on the TV sale, they still made their normal margins on the other items you bought.

credit tips!

Take a look at the chart below. 12% of Canadians ended up overshooting their budget by $500 or more in the holiday shopping season while a whopping 25% said they were unsure of how much they overspent (which is arguably worse!).bar chart Though we all enjoy the holiday season, the marketing techniques used during these times of year are a trap. Air tickets and hotel prices will always be high for desirable locations. Cruises will be more expensive. Being dragged into a store by a “deal” will likely result in overspending on other unnecessary items. Even food, wine, and alcohol is more expensive. Take the time to analyze pricing of the necessary or wanted items throughout the year and the holiday season, and maybe buy in the “off season”. If you set alerts on certain online stores such as Amazon, you will see that if you just wait a bit, prices will drop regardless of a holiday or special sale. Yes, this takes patience, and this is the hardest human trait to learn. We’re certainly not born with it. But, financial discipline requires patience, so you must learn it sooner than later in order to not become or remain an impulse buyer. This doesn’t extend just to you. This should be learned by your entire family, and they must understand that there are limits to household spending. Manage your individual and collective expectations accordingly.

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